Medical Debt and Credit Reports: The Latest Updates

These days, millions of Americans make up an estimated $88 million in medical debt, according to the Consumer Financial Protection Bureau. Fortunately, a little relief isn’t just on the way, it’s already here!

The three major credit bureaus – TransUnion, Equifax, and Experian – have changed how they will report medical collection debt moving forward. Approximately 70% of medical collections are impacted by these changes, so here’s everything you need to know about the latest updates.

Paid Medical Collection Debt Reporting

As of July 1, 2022, paid medical collection debt will no longer appear on consumer credit reports. Under prior practices, debts could remain on your record for as long as seven years. No longer will you need to worry about medical bills you’ve paid off remaining on your credit report when you go to apply for a loan. If these blotches have held you back from applying for a mortgage in the past, now is a good time to start back out on your homebuying journey. The Knowledge Center is a fantastic resource to help you prepare. Just remember, homeownership is within reach.

Unpaid Debt Extension

Also taking effect in July 2022 is the length of time before unpaid medical collection debt appears on consumer credit reports, increasing from six months to one year. This means you have a full 12 months to straighten out any lingering medical debt issues and apply for a home loan if you’ve been interested in buying but couldn’t. After the 12 months are over, the debt will officially impact your credit history.

Credit Report Exclusions

While the aforementioned changes have already taken effect, there’s one last update that’s still on the horizon. In the first half of 2023, medical debt collection accounts under a pre-defined minimum threshold (most likely $500 minimum; the exact number will be published in late 2022) will no longer appear on credit reports. That’s fantastic news for anyone still holding on to a $400 bill for an all-expenses-not-paid trip to the hospital.

What It All Means for You

Finally, don’t forget that these changes won’t affect any payment arrangements you’ve made privately with your medical provider. Continue to follow the guidelines you’ve agreed on.

With many looming medical bills dropping off credit reports, now is a great time to reach out to a lender to discuss all your lending and refinancing options. You never know, the smallest change to your credit could lead to a whole new homebuying journey for you and your family!